"Tadawul" Officially Announces the Launch of the #Financial_Derivatives_Market ... Tuesday

The Saudi financial market (Capital Market Authority #CMA) is awaiting an event that is important in its path, as the financial market is expected to announce the launch of the derivative market through a press conference to be held next Tuesday. Engineer Khalid bin Abdullah Al-Hossan, CEO of Tadawul, and Wael bin Abdullah Al-Hazani, CEO of Markaz Securities clearing (clearing).

• The #derivatives market includes #options, #futures and #forward contracts. By definition, are financial instruments whose value derives from the performance of a real or financial asset or from the performance of one of the market indicators, and financial derivatives help transfer financial risks between the contracting parties through the organized or parallel financial markets. Hence financial derivatives are a tool to protect investors’ assets in the stock market and are used by institutional investors and are very important as an attractive tool for institutional investment in the market.
• I personally see that The Saudi financial market is the most suitable for launching a derivative market in the region due to the size of the companies in which it has liquidity and the types of investors and joining the global indicators in comparison to other markets.

Futures, options, and forward contracts belong to a class of securities known as derivatives, and the profits or losses resulting from trading / dealing / trading in such securities are directly related to a underlying asset chosen or derived from it. In contrast, there are fundamental differences between these derivatives that one must understand before investing in them.

• The main difference between options and futures or forward contracts is that it is not mandatory to deal with the option owner, while futures and forward contracts are legally binding agreements. Futures also differ from forward contracts in terms of their typical nature and in terms of the convergence of the two parties in open public trading markets, while forward are considered private agreements between two parties and therefore their terms are considered non-public.
• Options can be typical and tradable on the stock exchange, or they can be sold or bought outside the official stock / market, with detailed conditions for measuring the needs of the parties concerned. Another fundamental difference is that you must pay money to buy the option, given that the option to exercise the option is a privilege. On the other hand, the owner of futures contracts or forward does not pay money upon concluding the agreement, but rather places himself under the obligation to buy or sell on the date of expiry.
• Regarding the Saudi Market, I expect to see a lot of changes in different aspects either in investment side or on the job market. Investors will start to see what they were looking for at the European and US capital markets in terms of investment opportunities and protection against huge losses. and on the other hand, in terms of jobs, skills, qualifications and opportunities for talents this is the real time where investment analysts and finance professionals must look for new skills and qualifications. Training needs must be revised accordingly and competency assessment must be reviewed in terms of these upcoming changes.
• Investment companies and Investors should now think on developing their staff either by hiring talents that suit the next era of investment or developing their staff by enhancing their skills in the areas of derivatives, pricing, valuations, and decision making.

Hesham Mokhiemer, MBA, CMA, CTP, FP&A, CFM

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